Malkiel_Random Walk_Chapter 16

Malkiel_Random Walk_Chapter 16 - Chapter 16 Raising Capital...

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Chapter 16: Raising Capital Companies raise Capital through borrowing (debt financing) or selling portions of the firm (equity financing). Venture Capital: financing for new, often high-risk ventures This money comes from wealthy individuals, pension funds, insurance companies, large corps, university endowments o Very high risk, high reward o Usually offers money through different stages to reduce risk Private equity is used to label equity financing for nonpublic companies Selling Securities to the Public To issue to the public, there are steps to follow: o Must obtain approval from board of directors o Must prepare a registration statement and file with SEC o SEC examines registration statement during a waiting period General Cash offer: securities offered to the general public Rights offer: Securities initially offered only to existing owners IPO: (or unseasoned new issue) The first issue when a company goes public
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